Calgary vacancy rate could go even higher in 2016, say experts

Renters in Calgary stand to gain the most from the energy sector's misfortune, with vacancy rates expected to increase after already jumping almost five-fold over the past year.

According to the Canada Mortgage and Housing Corp.'s (CMHC) Fall Market Report released in early December, Calgary's vacancy rate rose from 1.4 per cent in fall 2014 to 5.3 per cent in October 2015.

The national average was 3.3 per cent.

"We expect the vacancy rate to edge even higher in 2016," said CMHC principal of market analysis Richard Cho. "And with higher vacancy rates, tenants will have more choice in the market and landlords will have to do more to attract renters, naturally putting more downward pressure on rents.

A cloud of uncertainty hangs over top of Calgary's housing market in 2016. To help anxious buyers and sellers, here are a few key numbers from CREB®'s 2016 Economic Outlook & Regional Housing Market Forecast that will shed some light on what's to come.

18,416
After posting 25,543 sales in 2014 and 18,830 in 2015, CREB® is predicting Calgary's resale housing market to decline slightly in 2016 to 18,416 – below the 10-year average. Sales are expected to be down 2.5 per cent in the detached sector, 1.5 per cent in attached and two per cent in apartments. According to CREB® chief economist Ann-Marie Lurie, the beginning of the year will find Calgary in a buyer's market.

Beleaguered sector takes brunt of economic downturn

Apartment-style condominiums were the hardest hit within Calgary's resale residential housing market in 2015, with price drops and inventory gains that outpaced both attached and detached products

On an annual basis, the apartment benchmark price slide by 0.4 per cent to $292,818 by the end of November, according to CREB®. In comparison, year-to-date benchmark prices in the detached and attached sectors during the same period actually increased by 1.7 and 2.1 per cent, respectively.

Yet more telling is how apartment prices reacted during the year, as it dropped by four per cent from $298,700 in January to $287,000 in November. During this period, benchmark prices in the detached and attached sectors declined by a more modest 1.5 and one per cent, respectively.

Commercial vacancy rates represent market outlook

Nearly one out of five floors in the office towers that make up Calgary's famous skyline now sit empty, according to CBRE, which anticipates vacancy rates to increase further in 2016.

"Oil and gas companies on every level – from junior start-up to intermediate to major companies – everyone has gone through some form of layoff and therefore and have excess space," said Greg Kwong, managing director at the commercial real estate services firm.

Calgary's downtown office market ended 2015 with vacancy rates topping 17.4 per cent – nearly double from 9.8 per cent in 2014, according to CBRE's 2016 Commercial Real Estate Market Outlook.

Surrounding region's housing market to be similarly impacted by sluggish economy: CREB®

The resale residential housing market surrounding Calgary is expected to feel the pinch from a sluggish provincial economy, with prices facing downward pressure from slower sales activity.

In CREB®'s 2016 Economic Outlook & Regional Housing Market Forecast, chief economist Ann-Marie noted Airdrie and the Rockyview and Foothills regions will face similar conditions as that within Calgary.

"The resale residential housing market outside of Calgary will face the same macro-economic influences on housing demand as those within the city in 2016," she said, noting each area will have its own set of circumstances that will influence supply, demand and prices.

Several major projects in Calgary expected to capture headlines in 2016

Calgary is expected to look a lot different by the end of this year thanks to the opening of several highly anticipated developments that promise to reshape the local landscape, say officials.

"It was a good year in 2015, and the projects continue to come in for 2016," said Kevin Griffiths, director of inspections and permit service at the City of Calgary.

The National Music Centre, a new international terminal at the Calgary International Airport and the new central library are just a handful of the projects that could see their doors open in 2016.

While acknowledging downtown office construction projects have slowed, Griffiths said the pace for other commercial projects have increased. He singled out the Residence Inn by Marriott and SilverBirch Conference Centre, planned for the former site of the Alberta Boot Company on 10th Avenue S.W.

Comparing Calgary's current downturn to history

Calgary's infamous boom-bust economy is at it once again.

Just as it did in the 1980s and late-2000s, economic conditions have once again turned sour.

But does this downturn feel different from those that came before?

Yes, says CREB® chief economist Ann-Marie Lurie.

In CREB®'s 2016 Economic Outlook & Regional Housing Market Forecast, Lurie notes that while some have tried to compare this year to the early 1980s – in terms of its perfect storm of low oil prices and high unemployment – the underlying conditions are, in fact, much different.

Construction declines won't diminish market, says industry

Calgary's new housing market in 2016 will be characterized by a gradual slowdown, with highlights coming from first-time buyers, a resurgent luxury sector and continued multi-family growth, say industry insiders.

Canada Mortgage and Housing Corp. (CMHC) forecasts a 16 per cent decline in Calgary housing starts to 10,000 units, following a 23.9 per cent decline Calgary in 2015.
For single-family homes, that means only 4,000 starts this year — the lowest since 1988 – from 4,138 in 2015.

Multi-family starts are predicted to fall to 6,000 units from 8,895 last year.

Despite the slowdown, Canadian Home Builder's Association-Calgary president Wendy Jabusch believes Calgary's housing market will continue to remain healthy, especially as net-migration numbers to the city continue to be positive. The Conference Board of Canada forecasts levels will total 11,747 in 2016, compared with 14,951 in 2015.

Resale housing market expected to navigate ominous conditions in 2016

The year was 2014. The price of oil was soaring sky high, and, like so many other sectors, Calgary's housing market was along for the ride.

What a difference a few years make.

Following the collapse of worldwide oil prices and subsequent cooling of the city's once red hot housing market, the arrival of 2016 now finds Calgary in a time of uncertainty.

In its 2016 Economic Outlook & Regional Housing Market Forecast, CREB® expects resale sales activity to decline by 2.2 per cent from 2015 levels to 18,416 units, and the benchmark price by 3.44 per cent to $438,652.

Vacancy rates spike as downturn makes its presence felt

Calgary's commercial sector has not been spared from prevalent weakness in the provincial economy, with prime spaces in the city left empty for most of 2015.

Vacancy rates in Calgary's commercial office sector increased by 5.8 per cent from the beginning of the year to the end, noted commercial real estate firm Avison Young. In downtown specifically, vacancy jumped 7.2 per cent, which accounted for approximately three million square feet.

In comparison, office vacancy rates tripled from four to nearly 12 per cent during the last economic downturn in 2008/09.